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[0001] The invention relates to a system and method for forecasting consumer demand of a product or service. More particularly, the invention relates to a system and method that applies econometric techniques to historical marketing spend data and historical spend data to determine an impact of elements marketing the product or service.
[0002] Merchants, in particular retailers of goods, attempt to maintain an inventory supply that is sufficient to accommodate consumer demand yet not maintain a large surplus. Typically, merchants estimate a needed inventory supply using, for example, an educated guess based on prior sales of a particular product, time of year, etc. These are rather rudimentary methods of determining a needed inventory. Additionally, these methods may not take into consideration how marketing materials, for example, coupons, radio and/or television commercials, flyers, etc., may affect a demand for a particular product or service. Even if these methods take marketing into consideration, the method typically do not use a systematic approach, rather, an educated guess method may be used.
[0003] Furthermore, these methods typically do not enable a merchant to maintain a record of variances in product or service demand and reasons for the variances. These and other drawbacks exist with current systems.
[0004] The invention relates to a system and method for using econometric techniques to quantify the marketing drivers of consumer demand, retail-load adjustments, and shipments. The invention includes a customized software tool that assists businesses to analyze the impact of marketing activities on future sales by forecasting consumer demand, retail-load adjustments, and shipments for a particular product or service based upon past results. The tool helps businesses to better forecast shipments based upon marketing spending by calculating the relative effect of each element of a marketing plan using econometric modeling. The tool applies dynamic regression, or other econometric modeling techniques to analyze historical marketing spend data and historical sales data to calculate the quantifiable impact of each marketing element on consumer demand and retail load adjustments. The elements of the marketing plan may include promotions, advertising, points of distribution, product changes, etc. that may be offered to consumers. By forecasting how each marketing element may affect consumer demand and retail-load adjustments, a business may evaluate how to better forecast shipments based upon its marketing spending.
[0005] The tool may also be used to directly forecast shipments. Econometric modeling techniques may be used to analyze historical marketing spend data and historical shipments to calculate the quantifiable impact of each marketing element directly on shipments.
[0006] The tool enables the user to input future marketing spending by product and marketing element. This enables the user to perform what-if analysis and determine the impact of the marketing spending on forecasted consumer demand and required shipments.
[0007] The tool may also be used to capture and track actual consumer demand and shipments to highlight and assess forecast errors. Detailed reports may be generated that indicate demand forecast error and shipment forecast error. The detailed reports may be generated according to a time period, product, etc. Users may document potential reasons for demand forecast errors and shipment forecast errors. The potential reasons for errors in the demand forecast and shipment forecast may be maintained in a log. The log may be used to keep a record of the demand and shipment forecast errors to reduce a likelihood of repeating these errors.
[0008] These and other features, aspects, and advantages of the present invention will become better understood with reference to the following description, appended claims, and accompanying drawings where:
[0009]
[0010]
[0011]
[0012] The invention relates to a system and method for using econometric techniques to quantify the marketing drivers of consumer demand, retail-load adjustments, and shipments. The retail-load adjustments may be retail demand for a product or service generated by future sales incentives, new product launches or other factors which motivate retailers to carry extra stock.
[0013] According to one embodiment of the invention, a marketing plan that includes at least one marketing element may be provided by a business, step
[0014] A lift coefficient may be assigned to each variable and may be used to forecast future consumer demand, anticipated retail load adjustments, and total shipments. The total shipments may be defined as a sum of consumer demand and anticipated retail-load adjustments. The marketing forecasting tool enables users to enter planned marketing spend amounts for each marketing variable to forecast consumer demand and required shipments, step
[0015] According to one embodiment, regression analysis or other econometric modeling techniques may be used to directly forecast shipments based on marketing spending rather than modeling the effects on consumer demand and retail load adjustments to build up the shipment forecast. In these instances, econometric modeling techniques may be used to analyze historical marketing spend data and historical shipments to calculate the quantifiable impact of each marketing element directly on shipments.
[0016] Econometric modeling has been used by others to explain why certain circumstances have occurred. However, the present invention now uses econometric modeling as a forecasting tool—looking forward rather than backward. Shipment data has also be leveraged by others for various purposes. However, prior uses of shipment data has used exponential smoothing and other techniques. The present invention now uses econometric modeling on shipment data since it can show how business decisions drive changes in shipments beyond standard sales activities. One embodiment of the invention is able to forecast approximately two months into the future. A second embodiment is able to forecast a full year into the future. When forecasting on an annual basis, other various factors may be used as part of the econometric modeling step, where such factors are particularly well suited for such longer term forecasting.
[0017] According to one embodiment of the invention, the business may evaluate what-if scenarios and adjust the planned spend on various marketing elements based upon their impact on the forecasts, step
[0018] The marketing plan may be executed, step
[0019] The tool may be used to enable a user to perform an assessment to identify the reasons for any variances between the consumer demand and shipment forecasts and the actual results, step
[0020]
[0021] A lift coefficient may be associated with each marketing variable and may be used to forecast future consumer demand, retail load adjustments, and thus, total shipments. In some cases, the lift coefficients may directly correlate the marketing spending to the total shipments as described above.
[0022] The system
[0023] A marketing plan executing module
[0024] The system
[0025] While the specification describes particular embodiments of the present invention, those of ordinary skill can devise variations of the present invention without departing from the inventive concept.